2G licences: Why Bharti Airtel is the biggest gainer

Bharti Airtel seems to have come out clean and is likely to be the biggest beneficiary from the judgement announced by the Supreme Court. As a result of the judgement, 4.4 Mhz of 2G spectrum per circle has been freed which results in freeing up of almost 55 Mhz of spectrum. One has to wait and see how these licences are auctioned and at what price.Smaller telecom companies were making inroads in the market share of bigger companies by aggressively pricing their services. Most of the smaller companies are making operating losses as a result of this pricing strategy. This has resulted in a reduction in margin and lower client addition for most of the players in the sector. Though the smaller companies can operate for another four months, it is likely that Bharti and Idea might opt for raising tariffs for its services as the threat of competition would nBharti already has the highest number of subscribers in the country. The company as on December 2011 had 175.65 million subscribers in its fold, however, its monthly addition was slowing down. Take the case in December, while Bharti Airtel added 0.96 million subscribers, Uninor added 2.12 million. With licences of Uninor being cancelled, both Idea and Bharti are expected to benefit from the judgement as number portability can help clients to switch easily. Citigroup in a report has said that the biggest losers will be new entrants like Swan, Uninor, Sistema. They added that BhartiAirtel will be the biggest gainer as there has been no cancellation of licences for them. Moreover, with the cancellation of licences a fresh auction will take place and those prices for spectrum will be taken as base for the excess spectrum. Jagannadhan Thunuguntla, head of research, SMC Investment and Advisors, Mumbai feels Bharti Airtel and Idea Cellular will emerge as popular brands and their strong balance sheets will be clear beneficiaries because they can take advantage of this situation and increase market share. The stock gained around 7 percent at Rs 386 on likely allocation of spectrum. The shares touched an intraday high of Rs 392.95 and an intraday low of Rs 358.30. It was trading with volumes of 959,155 shares. o longer exist.